In today’s briefing:
- Kokusai Elec (6525) ¥300bn+ Offering at ATH – Almost a Second IPO
- Details of Two Doosan Mergers Involving Enerbility, Robotics, & Bobcat
- Hang Seng Internet & IT Index (HSIII) Rebalance Preview: Three Adds/Deletes & Capping Changes
- Fast Retailing (9983) – Great (Bte) Earnings Now Out of The Way; Anticipating End-July Capping Data
- Canvest (1381 HK): Evaluating A Privatisation
- [JAPAN ACTIVISM] Keisei Elec (9009) AGM Result Not Salutary, Tough To Win On This Stance
- Fast Retailing (9983) | Q3 Masterclass
- Trading Setup Targeting the Netmarble PSR Contract, as Seen in the Case of Doosan Bobcat
- Puig Brands Joins the IBEX35
- Henlius (2696 HK): Dilemma as the Scrip Pre-Condition Met and a Substantial Shareholder Emerges
Kokusai Elec (6525) ¥300bn+ Offering at ATH – Almost a Second IPO
- Today post-close we got confirmation of yesterday’s Reuters scoop of a secondary selldown on Kokusai Electric (6525 JP) after the stock fell 7.2% in heavy volume.
- KKR HKE LP and KSP Kokusai LLC (Koch) will together sell 52.5mm shares plus another 7.8mm+ in the greenshoe. Split is 50/50 domestic/international.
- This is 60+mm shares against 51mm shares held by non-passive holders ex-Capital (who has been selling). It’s a lot of stock at a high price.
Details of Two Doosan Mergers Involving Enerbility, Robotics, & Bobcat
- The restructuring plan of Doosan Group announced today primarily consists of two merger events aimed at transferring the stake in Doosan Bobcat held by Doosan Enerbility to Doosan Robotics.
- The 50% price cut on Doosan Enerbility’s share price for merging with Doosan Robotics boosts Robotics’ advantage. This resulted in a swap spread opening with Doosan Bobcat.
- Considering an arbitrage strategy in the Doosan Robotics and Doosan Bobcat swap needs caution due to shareholder approval risks, especially with Doosan Enerbility’s low controlling stake potentially complicating the process.
Hang Seng Internet & IT Index (HSIII) Rebalance Preview: Three Adds/Deletes & Capping Changes
- The review cutoff date for the September rebalance of the HSIII was 28 June. The changes will be announced on 16 August and become effective after the close 6 September.
- There could be 3 changes to the index with some inclusions driven by potential addition to the Hang Seng Composite Index. That could lead to buying via Southbound Stock Connect.
- Capping will result in passives buying Kuaishou Technology (1024 HK) and JD.com (9618 HK) while selling Meituan (3690 HK) and Tencent (700 HK).
Fast Retailing (9983) – Great (Bte) Earnings Now Out of The Way; Anticipating End-July Capping Data
- Yesterday after the close, Fast Retailing (9983 JP) reported salutary Q3 earnings, and raised its full-year (to August) guidance and its final dividend forecast (by ¥50/share)
- Q3 revenue and profit gained sharply (Rev +13.5%, OP +31.2%) everywhere but Greater China. OPMs were up, especially in Japan. Early summer has been good, despite FX impact.
- New guidance is above consensus, the ADR popped, and with slightly stronger yen on US CPI, that should help. But we approach end-July. Expect lots of pop-sellers.
Canvest (1381 HK): Evaluating A Privatisation
- Since waste-to-energy play Canvest Environmental Protection (1381 HK) announced a possible privatisation from Grandblue Environment (600323 CH) at $4.90/share (a 20.7% premium to undisturbed), shares are up just 6.4%.
- There’s a lot to pack in here, not the least being this is an indicative Pre-Conditional Offer.
- But the fact the announcement mentions rolling over a specific number of shares of the controlling shareholders (7.23%), suggests negotiations are well advanced. So we explore.
[JAPAN ACTIVISM] Keisei Elec (9009) AGM Result Not Salutary, Tough To Win On This Stance
- A week ago, the Keisei Electric Railway Co (9009 JP) AGM took place. The activist which had proposed a shareholder resolution saw ISS and Glass Lewis support.
- But that was to no avail as the shareholder proposal got 29.89% of the votes, and 26.15% of total voting rights. This likely informs the near-term future of such proposals.
- I expect the ask needs to change, and the agenda item needs to be difficult to be against.
Fast Retailing (9983) | Q3 Masterclass
- Fast Retailing delivered an impressive Q3 report. Sales +10% YoY were +3% above our expectations.
- Big jump in profitability. OP +31% YoY to Y145b driven by +57% jump in Uniqlo Japan earnings. Record consolidated OPM ~19%
- Uniqlo’s performance is leaving global peers in its wake. Profitability now rivalling Inditex. However, valuations remain at a premium
Trading Setup Targeting the Netmarble PSR Contract, as Seen in the Case of Doosan Bobcat
- This block deal has an unusual PSR (price swap return) contract at ₩58,200, the July 10th closing price, likely preventing Netmarble’s typical stock price correction today.
- In 2022, a similar-sized local PSR transaction involved Doosan Bobcat Inc, with 9.9 million shares and a PSR swap price of ₩37,500.
- As for Doosan Bobcat, the stock initially dropped but rebounded near the PSR swap price, prompting local brokerages, focused on PSR fee income, to sell rather than realize capital gains.
Puig Brands Joins the IBEX35
- The Technical Advisory Committee (CAT) in an extraordinary meeting adds Puig Brands (PUIG SM) to the IBEX 35 index and removes Melia Hotels International Sa (MEL SM).
- Although Puig Brands has only been publicly traded since 3 May, its market value exceeds €14.5 billion and its trading volume makes it deserving of a spot in the IBEX.
- Puig Brands is expected to see at least a 50% increase in trading volume by July 22, potentially adding four to eight additional days of trading volume.
Henlius (2696 HK): Dilemma as the Scrip Pre-Condition Met and a Substantial Shareholder Emerges
- Shanghai Henlius Biotech (2696 HK) announced that the share alternative pre-condition was satisfied. However, the share alternative offer remains at Shanghai Fosun Pharmaceutical (Group) (2196 HK)’s discretion.
- Loyal Valley Capital (LVC), a pre-IPO investor, emerged as a substantial shareholder on 10 July, the deadline for submitting letters of interest for the share alternative offer.
- The likely scenario is that the offer succeeds as the co-founders enter rollover arrangements, and a share alternative is introduced, which is taken by QIA and LVC.
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